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Paper 2

Whole Foods Market


In 1978, John Mackey and Rene Lawson Hardy borrowed $45,000 to open a natural foods store in Austin, Texas.  In 1980, they renamed it Whole Foods Market and it was an immediate success due to the extremely low supply of natural foods stores at that time.  Since then, Whole Foods Market employs over 65,000 workers and has opened 310 stores across North America and in the United Kingdom.  The executives at Whole Foods Market have established a mission that focuses on Whole Foods-Whole People-Whole Planet.  Each of these is believed to play a major role in their success as a company.  In addition, the executives have embedded in the company culture the idea that “companies, like individuals, must assume their share of the responsibility as tenants of Planet Earth”.  As a profitable, public company, Whole Foods Market is proving that a company can generate returns to its stockholders and act responsibly toward other stakeholders such as customers, suppliers and the community.  (Wholefoodsmarket.com)

The Whole Foods aspect of their mission is focused on searching for high quality, natural foods with the least amount of artificial additives so that customers enjoy nutritious and tasty food.  They act as buying agents for their customers rather than selling agents for manufacturers.  Whole Foods Market recognizes the importance of their employees to the success of the company.  As such, they have developed a company culture within a decentralized structure that is motivational, respectful and fair.  The mission’s emphasis on the whole planet reflects their commitment to caring for the world and dedication to improving the planet and its communities, both local and global. (Wholefoodsmarket.com)

Customers are considered the most important stakeholders to Whole Foods Market’s business.  They hold the belief that satisfied customers are necessary to satisfy the needs of other stakeholders.  In addition to providing high quality products and services, the store atmospheres are designed to be fun and interactive and reflect the communities in which they are located.  Shareholders are also of vital importance to the company.  As a public company, the executives are administrators of shareholders’ investments and embrace the responsible for long term shareholder value.  The executives recognize the need to generate profits and create capital for future growth. (Wholefoodsmarket.com)

Sustainable agriculture is a central part of Whole Food Market’s participation in improving communities and the environment.  They are the first nationally certified US grocer committed to expanding the market for organic products.  Supporting organic farmers ensures the use of sustainable agricultural practices such as the use of renewable resources and the conservation of water and soil.  In addition to organic farming, the company has set up a recycling initiative that reuses and reduces waste at all levels of operations.  To ensure the best prices for customers, Whole Foods Market works closely with its suppliers to decrease superfluous production and distribution costs.  In addition, they emphasize transparency in their supply chain from the farmer to the customer.  For example, Whole Foods Market provides information regarding genetically engineered ingredients and clearly labels products as GMOs.  This allows customers to be informed about issues surrounding ingredients, product safety and sourcing. (Wholefoodsmarket.com)

With these ideals and values in place, Whole Foods Market has established specific programs to address some concerning issues.  Whole Planet Foundation provides microcredit to creative, energetic entrepreneurs in emerging economies.  Its mission is to alleviate poverty in developing-world communities where Whole Foods Market sources products.  In 2012 alone, the campaign has raised over $5 million.  Whole Kids Foundation’s mission is to improve children’s nutrition by supporting schools and families.  They partner with educators and work with them to provide healthy meals to children.  A recent initiative of the foundation is to grant 6,000 salad bars to schools across the US by 2013.  (Wholefoodsmarket.com)

The Green Mission is a large scale commitment by Whole Foods Market to offset 100% of its energy with wind energy credits.  Recently, they have added solar power as an additional renewable energy source.  The local producer loan program is another initiative that provides up to $10 million in low-interest loans to small, local producers.  This helps local producers stay competitive which improves the local economy.  Seafood Sustainability is another recent initiative adopted by Whole Foods Market.  According to MSC, the world’s leading certification body for sustainable wild-caught seafood, 80% of fisheries are exploited, overfished and depleted.  The partnership with MSC has enabled Whole Foods Market to only offer seafood that comes for a sustainable supply chain (Appendix 3). (Wholefoodsmarket.com)

In 1992, Whole Foods Market went public and its stock price has fluctuated around $80 per share (Appendix 2).  In addition, the net income on their income statements has increased from $118.7 million in 2009 to $342.6 million in 2011 (Appendix 1).  These figures are evidence of Whole Food Market’s recognition that profits are essential as a publicly held company.  They are a profitable company that has seen significant increases in revenue and net income since 2008.  According to Freidman, as a publicly held company, Whole Foods Market’s focus should be on profit making only and they should stop focusing on social responsibility. (Yahoofinance.com)

Freidman believes the stockholders are the most important stakeholders in the company and should be the company’s main focus.  This is contrary to Whole Food Market’s position that their customers are their most important stakeholders.  He would argue that since the stockholders elect the executives each year, the executives must serve in the best interest of the stockholders.  Generating profits for their stockholders should take precedence over all other social matters.  In addition, Freidman believes that stockholders elect executives for the sole purpose of making profits.  If the executives use their power and resources for social purposes, then they are merely an employee of society and the public.  Freidman would object to a number of actions by Whole Foods Market on behalf of social responsibility.  He would strongly oppose their commitment to give at least 5% of their profits each year to community and non-profit organizations.  According to Freidman, these profits belong to the stockholders and the executives are essentially giving away money that does not belong to them. (Freidman and Wholefoodsmarket.com)

Whole Foods Market may argue that the stockholders who invest in their company are like minded individuals in that they believe in their mission.  Their success as a publicly traded company proves that investors like and support the business strategy of Whole Foods Market.  Stockholders may agree with Whole Foods Market’s commitment to social responsibility because it is what makes them a unique company for customers and they may not be profitable without this brand image and reputation.  Therefore, Freidman’s argument that the diversion of resources today does not allow for potential profits in the future does not apply to Whole Foods Market.  Additionally, Freidman’s arguments fail to include the possibility that executives may be elected because they share the same vision for the company rather than one that only entails profit generating.

Coinciding with Freidman’s arguments for more shareholder value is Henry Miller, a columnist at Forbes.com.  He is critical of the speech delivered by Whole Foods Market CEO, John Mackey to Stanford MBA students.  Miller is critical of Mackey’s claim “to have created a ‘conscious business’—one that is not a slave to profits but strives to serve others, change the world and fulfill a higher purpose”.  Miller’s response is that “in addition to a higher purpose, Mackey also offers higher prices.  Much higher prices”.  Like Freidman, Miller believes it is the moral and ethical responsibility of executives to serve their employers, the shareholders.  Socially responsible actions are raising the cost of doing business which reduces the productivity of corporations.  Miller believes executives who want to support non-business related goals should do so with their own money instead of spending the money that rightfully belongs to shareholders. (Miller)

Freidman believes corporations are not individuals and though they have responsibilities, these are categorized as artificial responsibilities.  They are responsible for adhering to laws and businesses are only responsible for following these laws such as avoiding deception or fraud.  Although this statement is technically accurate, it may be outdated.  Current trends in business and societal awareness have caused businesses to look toward society just as much as the law for guidance in business decisions.  Society is unable to make laws and enforce them, but there are emerging socially acceptable customs for business practices today and societal pressure can have a large impact as an enforcement mechanism.  However, Miller is evidence that there are still people in business today who agree with Freidman and believe corporations are succumbing to societal demands above those of their shareholders.

Whole Foods Market is an example of a company whose operations go against Freidman’s ideology that the only social responsibility of business is to increase profits.  Whole Foods Market is number 284 on the Fortune 500 list and they have been ranked in FORTUNE magazine’s “100 Best Companies to Work For” for 15 consecutive years.  They are a company that is both socially responsible and continues improving their profits year after year.  Whole Foods Market has done what Freidman once questioned.  They have successfully balanced corporate social responsibility with profit generation to create the best outcome for all their stakeholders.

Works Cited

Freidman, Milton. “The Social Responsibility of Business Is to Increase Its Profits”, September, 13, 1970. New York Times Magazine.

Miller, Henry. “Whole Foods Follies”, June, 6, 2012. www.forbes.com.

Wholefoodsmarket.com

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Discussion

One thought on “Whole Foods Market

  1. Does Miller invoke Friedman?

    Posted by Jordi | April 25, 2012, 1:00 pm

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